slipher marketing | Customer churn | strategic marketing | small business marketing

Customer churn

A meeting with a longtime client this past week prompted me to write about a marketing issue that often crops up with businesses, both small and big.

Basically, the issue amounts to ushering new customers in your proverbial front door while letting existing customers walk right out your back door. The issue is referred to in marketing circles as churn. It's common among businesses that become adept at attracting new customers (through necessity or skill,) but can't hang onto them.

Customer churn can emanate from either end of the customer lifecycle. Some form of these two scenarios exists when a business has problems with churn:

(A) an existing 'best' customer has a favorable experience with a company's product or service, but over the long haul, loses a sense of relationship with a company and it's brand, which leaves him or her feeling unfulfilled, undervalued or ignored. As a result, the customer leaves or simply never returns. This forces a business into the obvious position of putting extra energy into attracting even more new customers. In this scenario, the company is usually sincere in its approach, but may not have a sense of a customer feeling ignored, unfulfilled or undervalued.

(B) an 'uber-cool' new customer experience that is almost too good to be true (usually built upon a promotion, deal, or slick sales pitch), followed almost immediately by 'the big letdown' - the customer is left in the dust once he or she has made it through the sales process, or figures out that the product or service was really not the best choice after all. In this case, a company usually hasn't even a notion of the value of customer retention and cares more about new sales.

What's so crazy about churn is that it's often easily witnessed or experienced by the customer, but rarely acknowledged head-on by those inside the very businesses that suffer from it. This is particularly the case with companies in scenario B. Sometimes addressing the issue involves opening one's eyes, along with a fundamental shift in how a company values its best customers.

Once customer churn is acknowledged within an organization, the solution to is usually connected to the reason for the churn in the first place. For example, if a company is notoriously sales-centric and customer service-scarce, the answer might be a re-vamped sales program that puts customer targeting, understanding and satisfaction right up with (or even above) getting the sale. On the back-end it might also call for a customer retention program that addresses post-sales issues and concerns, improved product/service warranties, and discounts or rewards for returning customers.

Why is customer churn to be avoided? Well, the reasons might be obvious, but allow me to indulge you:

1. It costs more money. In other words, it costs less money to hold onto current customers than to find new ones
2. It destroys your company's credibility, which long-term, can be even costlier. It's a steep hill getting that back.
3. It destroy's your brand's equity, which can be almost impossible to recover. Do you want most customers seeing your brand like they do American Airlines, AT&T or BP?
4. Conversely, it doesn't build any of the following - product or service value, loyal customers, positive brand image or long-term profits. I think most businesses would agree that these are all good things to have.

Finally, no business is immune to customer churn. Sometimes, a business on the right path might suddenly find itself experiencing churn issues. The forces can be internal or external.

Next time: identifying common culprits of customer churn and how to avoid falling into the customer churn trap.